Ryan Bridge: The economy's been a sick patient for a long time

If growth is the game we're in then the Reserve Bank should keep cutting interest rates. 

The problem is growth is not the game they're in. They're in the business of taming inflation, and that's about it. 

The Government ditched the dual mandate —introduced by the last lot— that saw Adrian and Co. also focus on keeping people in jobs. Maximum sustainable employment. 

That's now gone and inflation's in the band. 

So the bank is going to take things slow. Ease the next few cuts over a longer period of time out of fear they'll overcook it again.

They'll be thinking about Trump's tariffs and the fear of price hikes, even though these haven't materialised —even in the data out of the States— as yet.

They'll be worried about the Middle East and the price of oil. 

It's an imported cost and it's in everything, not just our cars, but transport of goods, production, you name it. 

It directly and indirectly contributes up to 30% of our inflation when the price is high – like when somebody's dropping bombs in the Middle East. 

But that wouldn't be my main concern if I was setting monetary policy. 

Sure we'll get a solid growth number of around 0.7% for Q1 on Thursday, but there've been a couple of signs this week of things being a bit shaky in Q2 – the one we're in now. 

Yesterday it was a Mayday call from the services sector – going backwards for the month, again. This time, a bigger drop than last. And again, way out of whack with our trading partners.

Our golden dairy run will continue but there are signs production will be up this year on last, which could effect price. 

Cutting rates sooner and faster would help avoid any surgical complications as we revive the economy, which as been a very sick patient for a very long time. 

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Episode Transcript

Speaker 1 (00:00):
If growth is the game we're in, then the Reserve
Bank should keep cutting interest rates. The problem with growth
is it's not the game therein they're in the business
of taming inflation, and that's about it. The government ditched
the duel mandate, remember this introduced by the last lot
that saw Adrian Or and co. Also focus on keeping
people in jobs. They called it maximum sustainable employment. That's

(00:25):
now gone. And inflation is the aim of the game,
and inflation is in the band. So the bank is
going to take things slow. They're going to ease the
next few cuts over a longer period of time, basically
for fear that they'll overcook the whole thing again. They
will be thinking, of course about Trump and his tariffs
and the fear of price hikes, even though these haven't

(00:45):
materialized even in the data out of the United States
as yet. They'll be worried about the Middle East. They'll
be worried about the price of oil as a result
of the Middle East. It's an important cost, of course,
and it's in everything, not just our cars, transport of goods, production,
you name it. Directly and indirectly contributes up to thirty

(01:05):
percent of our inflation. When the price is high, like
when somebody's dropping bombs in the Middle East, But that
wouldn't be my main concern if I was setting monetary policy,
not that anyone would let me. Sure, we'll get a
solid growth number of around zero point seven percent for
quarter one on Thursday. But there's been a couple of
signs this week, just a few little ones, that things

(01:27):
are a bit shaky for quarter two, the one we're
in now this year. Yesterday it was May Day calls
from the services sector going backwards for the month again,
this time a bigger drop than last and again way
out of whack with our trading partners. And our golden
dairy run will continue, don't worry. I'm not saying that won't.

(01:48):
But there are signs, early signs that production is going
to be ramping up around the world, and of course
that affects the price, brings it down. Cutting rates sooner
and faster would help avoid any surgical complications as we
revive the economy which has been, let's face it, a
very sick patient for a very long time. For more

(02:11):
from Early Edition with Ryan Bridge, listen live to News
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